Responsive regulation in public‐private partnerships: Between deterrence and persuasion

Design‐Build‐Finance‐Maintain‐Operate (DBFMO) contracts are a particular type of public‐private partnership whereby governments transfer the responsibility for the design, construction, financing, maintenance, and operation of a public infrastructure or utility service building to a multi‐headed private consortium through a long‐term performance contract. These arrangements present a typical principal‐agent problem because they incorporate a “carrot and stick” approach in which the agent (consortium) has to fulfill the expectations of the principal (procurer). This article deals with a neglected aspect in the literature related to the actual use of “the sticks or sanctions” in DBFMOs and assesses to what extent and under which conditions contract managers adopt a deterrence‐based enforcement approach or switch to a persuasion‐based approach, specifically when the contract clauses require the use of (automatic) deterrence. An empirical analysis of four DBFMOs in the Netherlands shows that the continuation of service delivery, the need to build trust, and the lack of agreement on output specifications play a role in the willingness of the procurer to apply a more responsive behavior that uses persuasion, even when deterrence should be automatically applied. © 2016 John Wiley & Sons Australia, Ltd     

Cyber insurance and private governance: The enforcement power of markets

In the last half decade, cyber insurance has emerged as a multi-billion-dollar industry with the authority to set and enforce standards of security behavior. Although cybersecurity has become a concern of national policymakers, insurers appear to have supplanted the state to play an influential role in governing some aspects of client behavior. This paper explores private governance by cyber insurance firms and evaluates two competing explanations for its emergence – either that the private sector advanced to set and enforce cybersecurity standards for financial gain, or that the state retreated from its responsibility to regulate and private sector actors filled the gap only as necessary. To find an answer between these explanations, this article develops a single outcome case study of the American cyber insurance industry. Following a theoretical introduction to private governance and its manifestation through insurance, the article examines the insurance process and its application in cybersecurity, the key role of standards, and the mechanism of enforcing those standards. The article concludes by identifying key elements of this market-based enforcement and discussing implications for crafting effective private governance in other domains and public policy.     

Orchestrating sustainability: The case of European Union biofuel governance

This article provides an empirical analysis of orchestration – that is, the initiation, support, and embracement of private governance arrangements through public regulators – in the field of European Union biofuel governance. It examines the emerging sustainability regime and shows that orchestration has been extensively practiced. Regulators in the European Union have used a range of directive and facilitative measures to initiate and support private biofuel certification schemes and to incorporate them in their regulatory frameworks. This has given rise to a hybrid regime in which public and private approaches are closely intertwined. Discussing the benefits and complications of engaging with private biofuel sustainability governance, the article's findings point to a partial failure of orchestration in this policy area.     

Private and public authority interactions and the functional quality of sustainability governance: Lessons from conservation and development initiatives in Tanzania

The changing shape of sustainability governance has been a key academic and policy concern in the past two decades, as part of a wider debate on the interactions between public and private authority in governing the economy, society, and the environment. In this article, we contribute to these debates by examining how these interactions operate locally and across jurisdictions in three conservation and development initiatives in Tanzania and what impact they have on the functional quality of sustainability governance. We find that clear division of responsibilities, coupled with material incentives for communities and equal and transparent distribution of benefits, are key positive contributors to functional quality. These factors underpin the complementary interactions (collaborative at the local level; institutional layering across jurisdictions) that are needed to successfully negotiate and implement the compromises needed to balance conservation and development goals. We also find that competitive dynamics are harmful to functional quality, especially those taking the form of local institutional duplication and of dominance by central government across jurisdictions. These tend to appear especially when sustainability initiatives involve multiple stakeholders with wide discrepancies in resources, interests, and power, which leads to compromises determined in a top-down manner.     

When private governance impedes multilateralism: The case of international pesticide governance

Private standards play an increasingly important governance role, yet their effects on state-led policymaking remain understudied. We examine how the operation of private agricultural standards influences multilateral pesticide governance with a particular focus on the listing of substances under the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade, a treaty-based information-sharing mechanism that allows countries to refuse hazardous chemical imports. We find that private agricultural standard-setting bodies use the Rotterdam Convention's pesticide list to develop their own lists of banned substances. This alters the Rotterdam Convention's intended role, impeding efforts to add substances to the treaty, as attempts by private actors to impose stricter governance than state actors can undermine the potential for international state-based governance to become more stringent. We characterize this as a “confounding interaction” whereby institutional linkages between actions by public and private actors with broadly aligned goals results in unexpected negative consequences for governance.     

From government to governance: External influences on business risk management

The influence of external organizations and pressures on business risk management practices has hitherto been examined through the influence of state regulatory regimes on businesses. This article concentrates on key socio‐legal concerns about the influence of the law in social and economic life. We know that the sources of regulation and risk management are diversifying beyond the state. What we do not have is much empirically informed research about the range of sources influencing the business world and in particular the weighting of influence exercised by them. In this paper we explore the understandings regulatory actors have of the different external pressures on business risk management through an empirical study of the understandings of those in the food retail sector about the management of food safety and food hygiene risks. A broader objective is to throw some further light onto the debate about regulation within and beyond the state.     

Grounding transnational business governance: A political-strategic perspective on government responses in the Global South

Recent scholarship on transnational business governance has begun to examine public-private interactions and the active role of governments. We make two key contributions that integrate and expand this literature. First, in juxtaposition to functionalist accounts, we foreground the fundamentally political and often contentious character of these interactions. As private transnational governance schemes and standards “hit the ground,” private-public interactions, we argue, are embedded in national political arenas and tied to domestic distributional struggles among competing regulatory coalitions. Building upon multiple empirical streams of research, we develop a political-strategic framework that maps the diversity of Southern government responses (substitute, adopt, repurpose, replace, or reject) to transnational private governance. Our framework shows that government responses are a function of both strategic fit with domestic industrial capabilities and structures, and strength of developmental state capacity. Second, our proposed framework adopts the vantage point of Global South governments and industries, particularly how development challenges and strategic options within global value chains affect their understanding of, and responses to, transnational schemes and standards. This is an important corrective to a Northern bias in the private governance literature.     

The 2009 Victorian Bushfires Royal Commission: Lessons for the Conduct of Inquiries in Australia

Royal commissions with their wide powers, independence and uncertain outcomes are adopted sparingly by government. Hence, those charged with establishing such an inquiry are often left to begin anew. The 2009 Victorian Bushfires Royal Commission (VBRC) provides a means of exploring lessons for public administration in light of its inquiry approach and internal operation. Similarly, recent reports on the conduct of statutory inquiries provide the opportunity to examine good practice. This article explores the central issue of what mode of inquiry is suited for particular circumstances. It characterises three different types of inquiry and analyses their features. The author provides participant observer insights from the VBRC and reflects on lessons learned.     

The Regulatory Gift: Politics,regulation and governance

This article introduces the “regulatory gift” as a conceptual framework for understanding a particular form of government‐led deregulation that is presented as central to the public interest. Contra to theories of regulatory capture, government corruption, “insider” personal interest, or profit‐seeking theories of regulation, the regulatory gift describes reform that is overtly designed by government to reduce or reorient regulators’ functions to the advantage of the regulated and in line with market objectives on a potentially macro (rather than industry‐specific) scale. As a conceptual framework, the regulatory gift is intended to be applicable across regulated sectors of democratic states and in this article the empirical sections evidence the practice of regulatory gifting in contemporary United Kingdom (UK) politics. Specifically, this article analyses the 2011 UK Public Bodies Act, affecting some 900 regulatory public bodies and its correlative legislation, the 2014 Regulator's Code, the 2015 Deregulation Act, and the 2016 Enterprise Bill. The article concludes that while in some cases the regulatory gift may be aligned with the public interest – delivering on cost reduction, enhancing efficiency, and stimulating innovation – this will not always be the case. As the case study of the regulatory body, the UK Human Fertilisation and Embryology Authority, demonstrates, despite the explicit claims made by legislators, the regulatory gift has the potential to significantly undermine the public interest.     

Learning Contested Lessons: Participation Equity and Electric Utility Regulation

Electric utilities have typically enjoyed a close and cooperative relationship with the state regulatory bodies that oversee them. In 2001, the Colorado Public Utilities Commission mandated that the largest Colorado utility build a wind power plant as part of its conventional generating capacity, despite the utility's vigorous objections. Local environmental groups, intervening in a form of rule making called Integrated Resource Planning, succeeded in overturning regulatory capture. This paper explains this anomalous case and highlights the role of knowledge and learning in the outcome. The case shows the opportunities and limitations of using contested technical knowledge to push for institutional learning. The case also suggests the importance of repeated policy processes. Wind energy advocates perceived that they had acquired participation equity, ownership in the process akin to Kingdon's “softening up,” which led policy makers to take their arguments more seriously, opening up the possibility of institutional learning.     

Forest certification as a global environmental governance tool: What is the macro-effectiveness of the Forest Stewardship Council?

Sustainable forest management is a key challenge for local and global governance. The Forest Stewardship Council has emerged as one of the solutions to global forest deterioration and is generally regarded as the prime example of certification as a global governance tool. This article examines the macro-effectiveness of certification on halting deforestation and examines the relationship between certification and governance institutions. The article finds that the macro-effectiveness of certification on halting deforestation is still limited due to the “stuck at the bottom” problem of developing countries, which are kept out of the certification process, and the market-driven nature of certification initiatives. The article does not find a relationship between certification and governance institutions at the macro level. It does find, however, significant variation in certification uptake between countries, pointing to the potential of this policy tool. The implications of the results are discussed.     

Harnessing Market Competition in PPP Procurement: The Importance of Periodically Taking a Strategic View

Public‐Private Partnerships (PPP) procurement is routinely portrayed as offering greater scope for harnessing competitive market forces to secure Value for Money (VfM) than traditional procurement approaches ( OECD 2008 ). The aim of this article is (a) to demonstrate the importance of periodically taking a more systematic and strategic view when assessing VfM in PPP procurement ( OGC 2003 ), and (b) to develop an analytical framework for such an analysis. Road infrastructure procurement in South East Queensland is used as a case study to test the usefulness of the proposed framework, and to show how a narrow focus on individual contracts increases the risk of overlooking overdependence on one supplier ( OGC 2003 ). Discussion focuses on the need to combine detailed analysis of individual contracts with longitudinal analyses of market competitiveness when assessing best VfM.     

The allusive market: insurance of flood risk in neoliberal Britain

Launched in 2016, Flood Re is a government-supported scheme for flood-risk insurance in Britain that is intended to pave the way towards an eventual ‘free’ market featuring risk-reflective pricing. This paper introduces the concept of ‘the allusive market’ to denote the figurative work that the market vision performs in this context. Alluding to the merits of what is in reality a highly implausible market-based future for flood insurance releases the government from having to substantively address intractable problems associated with the financial risk of flooding in the present: the market will come to the rescue. A risk-management crutch, the allusive market engenders contemporary policy paralysis, occasioning in turn the worsening of the very problems that the market is being relied upon, eventually, to resolve.     

Finding political capital for monetary tightening: Unemployment insurance and partisan monetary cycles

How do governments find the political capital to raise interest rates in pursuit of inflation stabilisation? Against common wisdom, this article shows that the ability of governments to exercise tight monetary policy largely depends on the level of unemployment insurance. Unemployment insurance is particularly useful to social democratic parties since their core constituency – labour – is the hardest hit by economic downturns. Empirical evidence from 17 OECD countries over thirty years demonstrates that high levels of unemployment insurance present a strong incentive for social democratic governments to respond more aggressively to positive changes in inflation. These findings resolve the puzzle of why partisan monetary cycles are not often observed in the literature and have important policy implications, given continued calls for scaling down social insurance.     

Counting on codes: An examination of transnational codes as a regulatory governance mechanism for nanotechnologies

This article examines the rise of nanotechnology‐specific codes of conduct (nano‐codes) as a private governance mechanism to manage potential risks and promote the technology. It examines their effectiveness as well as their legitimacy as regulatory instruments in the public domain. The study first maps the rise of voluntary nano‐codes and the roles played by different actors. Focusing on five specific nano‐codes, the article then discusses their adequacy in terms of scientific uncertainty, gaps in existing regulatory regimes, and broader societal concerns. It concludes that these voluntary nano‐codes have weaknesses including a lack of explicit standards on which to base independent monitoring, as well as no sanctions for poor compliance. At the same time it also highlights the potential power of these governance mechanisms under conditions of uncertainty and co‐regulation with government. It is likely that nano‐codes will become the “first cut” of a new governance regime for nanotechnologies.     

Regulatory capabilities: A normative framework for assessing the distributional effects of regulation

This paper develops the normative concept of “regulatory capabilities.” It asserts that nobody – individuals, groups, or entities – should be subjected to a regulatory regime without some freedom to determine its nature. Self‐determination in this context means the ability to accept or reject a regulatory regime imposed by others or to develop viable alternative approaches. We use the term “regulatory capabilities” to capture the importance of enabling conditions for regulatory self‐determination. This is particularly important in the transnational context where private, hybrid public–private, and public actors compete for influence, shape domestic regulation, and, in doing so, limit the scope for democratic self‐governance. In short, this paper seeks to contribute to the general debate on the normative foundations of and the requisite conditions for transnational regulation and governance.     

Railway Dreaming: Lessons for Economic Regulators from Aboriginal Resource Management Lore

Railway reform in the past decade has seen the introduction of mandated third party access to track in a number of jurisdictions. This article argues that third party access changes the property rights associated with railway track, rendering it a common pool resource. As such, it is useful to ask whether the literature on the governance of common pool resources could inform the economic regulation of railways. This article suggests that it might, and draws some lessons from the common pool resource governance mechanisms traditionally used by Australia's Aborigines in managing their land that may have application within the context of the railways.     

The rise of the constitutional regulatory state in Colombia: The case of water governance

This article interprets the regulatory state in Colombia as the result of a dialectic process between transnational knowledge and domestic politics, which influence, transform, and inspire each other. Such a process results in an interesting constitutional variant of the regulatory state, in which neo‐constitutionalism becomes a counterbalance to the unchecked expansion of neo‐liberal regulatory practices. I, therefore, distinguish between neoliberal and constitutional regulatory states. As a result of neo‐constitutionalism, the domestic judiciary is empowered, and becomes a crucial actor to understand both the specific traits of this regulatory experience, and its interaction with global centers of power.     

Politicians,regulators, and regulatory governance: The neglected sides of the story

We offer a series of reflective insights about the state and direction of studies related to the politics of regulation. Notably we argue that the field is characterized by persisting divisions between Americanists and Europeanists. Largely focused on the actions taken by political principals, the former regularly report a substantial politicization of regulatory behavior. Reflecting on recent developments in US politics however, we show that political influence could be overestimated in the United States. Symmetrically, this same influence could be underestimated by Europeanists, who for now have largely focused on regulators and agencies. This is notably suggested by a discussion of recent development in European politics, as revealed by contributions systematically measuring agency politicization in Western European democracies. On this basis, we identify some promising research questions and agendas for future studies on the politics of regulation.